Zoneless Pricing Improve Business Forecast Predictability
There are enough challenges to keep you up at night when you’re growing a company. So why introduce more unknowns to your business forecasting than you need to?
Among the many components involved in forecasting, an accurate projection of your expenses is key to eliminating uncertainties. It helps you better predict your finances, allocate your resources, and make informed business decisions.
Your business relies heavily on distributing products across the country, and shipping charges likely make up a substantial portion of your operating expenses. As such, the ability to control and predict your shipping charges will significantly impact the accuracy of your business forecasting.
To eliminate such uncertainties in logistics-related expenses, you can partner with a shipping carrier that offers zoneless pricing — a new pricing model that offers one rate per weight to make shipping charges more predictable versus the traditional 8 or 9 based on distance thresholds from the shipper.
The future of logistics is shifting to zoneless pricing as businesses recognize its predictability and cost-savings potential. Here’s how zoneless pricing works and the key zoneless shipping benefits:
The Downside of Traditional Zone Pricing
Zone pricing or zone rate refers to a freight rate based on the number of geographic regions a shipment needs to pass through between the starting point its destination. The more zones it has to pass through, the higher the freight rate is.
Traditional zone pricing is the most common model used by the majority of shipping carriers. It often introduces a large variation in the cost between shipping to destinations close to your warehouse (e.g., “zone 2”) compared to shipping to addresses farther away (e.g., “zone 8”). This is especially harmful to coastal shippers with a bi-coastal customer base (many high growth direct to consumer brands)
While it may cost just a few dollars more to ship a package to zone 8 rather than zone 2, the difference could add up quickly and impact your expense projections. Especially as you’re scaling up, a $1,000 difference today can grow into a $100,000 difference in a couple of years. Not to mention, just trying to decipher a zone chart from the major national carriers alone can be the cause of a major headache.
You also have to account for the additional time, labor cost, and complexity involved in a zone pricing model. As we have experienced during the pandemic, the complexity of a logistics process can multiply during challenging times. A system with more moving parts is more susceptible to substantial cost fluctuations.
What’s Zoneless Pricing and How Does It Work?
Unlike a zone pricing model, zoneless pricing means you pay a flat rate by weight no matter where your shipment is heading in relation to the starting point (or how many zones it’s crossing).
This pricing model is based on zone skipping, a logistics strategy that consolidates freight loads and “injects” them into local logistics systems for last-mile deliveries. This can be achieved by a shipping carrier that consolidates individual packages from various shippers, then holds and aggregate them until a specific quantity is reached (e.g., a full or half truckload).
This consolidated shipment is then sent from a warehouse to a sorting facility in the destination area (e.g., from the Northeast to the Southwest) from which the packages are delivered to their final destinations. As such, the shipment gets across multiple zones at the regional rate, instead of the national freight rate, allowing merchants to avoid freight rates for shipping across multiple zones.
The Benefits of Zoneless Pricing
You can take advantage of more predictable and lower shipping rates with a shipping carrier focused on the zone skipping logistics technique. This technique in turn makes it much easier to project your expenses and increase your business forecasting predictability.
The zone skipping concept can be used to bypass major parcel carriers’ systems altogether. For example, you can consolidate packages and send them straight to a local DSP (Delivery Service Provider) or USPS terminal for last-mile delivery. This can help you become less dependent on one specific major carrier and therefore, less likely to be affected by price increase or other changes that can impact the accuracy of your business forecasting.
Using zoneless pricing can also help improve the outlook of your forecast. For example, it reduces transit time so you can deliver a better customer experience and become more competitive in today’s “instant gratification” consumer culture without adding costs. Furthermore, the flat shipping rate helps keep your pricing stable and the lower charges mean you can pass some of the savings to your customers. This can increase your competitiveness and drive more sales in the long run.
Increase Expense Predictability With Zoneless Pricing
Zone skipping and zoneless pricing can most benefit companies that send high-volume and long-haul shipments regularly (e.g., high growth direct to consumer brands). Your provider can also pair your load with another shipper, so you can take advantage of the reduced pricing if you have less-than-load (LTL) shipments.
You should be aware that zone skipping may reduce last-mile visibility because a local delivery service most likely handles the packages. Since multiple carriers may be involved, you can’t rely on status alerts from national carriers, like FedEx or UPS, to keep customers updated. You’ll need to create a system to track packages and provide updates to your customers, such as adding a “where’s my order” page on your website.
Thanks to the latest technologies in shipping arrangement and carrier optimization, businesses recognize the benefits of zoneless pricing. We can expect more companies to shift to this method to better control their operating expenses and shield themselves from fluctuating logistics costs.
Start Taking Advantage of Zoneless Pricing Today
Partnering with a shipping carrier that uses advanced technology to optimize shipment consolidation, as well as lanes and trucking selections, can help you leverage zoneless pricing to increase the predictability of your expense forecasting.
Here at the shipping carrier simply known as ‘ZT’, we optimize the connection of in-motion supply chain assets with our network of carriers, warehouses, local delivery services, and more to help our customers reduce transit time, save cost, and increase forecast predictability. See if ZT is right for you and join us!